3-cent gas-tax increase divides officials

BOSTON -- Few seem happy with the 3-cent increase in the gasoline tax passed by state representatives Monday.

Some lawmakers think it's too much; others have condemned it as too little.

Gasoline dealers think it will hurt business. Others think the plan to tie further increases to inflation creates an ever-rising gas tax that will hurt low-income families the most.

"This is just like Toy Story's Buzz Lightyear: a gas tax to infinity and beyond," said state Rep. Marc Lombardo, a Billerica Republican.

The 3-cent hike in the gasoline tax, part of the legislative leadership's $500 million transportation budget passed by the House, raises the gasoline tax from 21 cents to 24 cents per gallon.

New Hampshire, which recently voted to raise its gasoline tax by 15 cents over the next four years, is the only New England state with a gasoline tax lower than Massachusetts. Nationally, the average state gas tax is the same as Massachusetts.

According to the plan, the tax hike will raise $95 million next year. When indexed to inflation, it is expected to rise slightly each year, raising an estimated additional $15 million annually.

According to the state Department of Revenue, gasoline-tax revenue was $582.9 million in fiscal 2012, up from $578.3 million in 2010. However, revenues remain below 2004 levels, when the tax raised $601.6 million.

Supporters say the increase is necessary to cover rising transportation costs and will not drastically affect consumers.

Advertisement

But Michael Widmer, president of the Massachusetts Taxpayers Foundation, said it isn't enough.

State Sen. Jamie Eldridge, an Acton Democrat whose district includes Shirley, supports a gas tax, but also thinks the gas-tax revenues would not sufficiently fix Massachusetts' transportation problems.

"What I've been focused on with the budget is a progressive income tax and closing corporate tax loopholes," said Eldridge, who has not decided whether to support tying the gas tax to inflation.

Opponents, however, say the gas tax will squeeze the middle class.

Backers of the plan said the average consumer would pay $12 to $30 more per year in gasoline taxes. But Rep. Dennis Rosa, a Democrat from Leominster, is wary of a tax that increases with inflation.

"In 20 years, the tax will go up almost 10 cents, and that increase is a lot bigger than people think," Rosa said.

John Howell, executive director of the Billerica-based New England Service Station and Repair Association, said the organization is more concerned with the $1 cigarette-tax hike that was included in the House plan, but considers the gasoline tax a problem as well.

"Any tax is going to affect our businesses, and the last few years have been difficult to do business, in general," he said.

Michael Turk, an economics professor at Fitchburg State University, acknowledged the gas tax will hit low- and-middle-income families more, but said the effects will be minimal.

"Almost all of us are keenly aware of minor movements in gas prices, but 3 cents probably would be imperceptible," Turk said. "Prices go up more than that in a week."

Andrew Bagley, director of research and development at the Massachusetts Taxpayers Foundation, said tying the gas tax to inflation would help sustain the buying power of tax revenues, which was not done the last time the gas tax was raised, in 1991.

"If we had indexed the gas tax in 1991 and let it rise, as with virtually all other expenses, we would not have to raise the tax now, and we wouldn't have to raise any other revenues," Bagley said.

A recent report from the Massachusetts Budget and Policy Center estimated that if the gas tax had been indexed to inflation in 1991, it would be 36 cents per gallon today.

Florida is the only state that indexes its gas tax to inflation. Thirteen other states, including Connecticut and New York, tax gasoline as a percent of the gasoline price, so taxes rise and fall with gasoline prices.

Noah Berger, president of the policy center, said this type of gasoline tax keeps up with inflation, because tax revenues increase when gasoline prices go up.

Although it would seem that all motorists would be affected in the same way under an inflation-indexed tax, some economists point out that not all workers see their wages keep pace with inflation.

According to the Bureau of Labor Statistics, inflation has fluctuated between 2 percent and 3 percent over the last decade. According to U.S. Census data, Massachusetts median family income has kept up with inflation, although it went down slightly in 2009.

Luis Rosero, an assistant professor of economics at Fitchburg State University, said real wages for skilled labor have increased more than has the real minimum wage.

"The growing disparity between blue collar and white collar has become more clear in the last recovery," Rosero said.

Welcome to your discussion forum: Sign in with a Disqus account or your social networking account for your comment to be posted immediately, provided it meets the guidelines. (READ HOW.)
Comments made here are the sole responsibility of the person posting them; these comments do not reflect the opinion of The Sentinel and Enterprise. So keep it civil.